Over the past few months, you may have followed our ‘What’s your “Why” for retirement’ series. The first part covered the importance of goals and deciding what kind of lifestyle you want to lead when you’re older. The second instalment gave more detail about how you can turn those goals into a savings target and ensure you’re building enough wealth to achieve your ideal retirement. Now, in the final part of the series, we’ll look at how you can use your savings to fund your lifestyle and ensure you can continue to live your “Why” throughout your retirement.
Read on to learn more.
Your retirement budget allows you to make sustainable withdrawals from your savings
As we discussed in the second part of this series, when building wealth for retirement, it’s important to consider how much your desired retirement lifestyle will cost each year.
This helps you determine your savings goal, so you can build adequate wealth to do all the things that are important to you in later life. It is important to remember that inflation will play a big part in the amount you need to spend each year, and therefore how much you will need to have saved in readiness.
When you make the transition to retirement, we can help you review your budget and confirm the level of income you need to draw each year to fulfil your “Why”. We will also help you identify potential sources of income and ensure that your investments align with your goals. Understanding what motivates you in retirement is crucial for creating a sustainable financial plan that supports your lifestyle. By tailoring your strategy to your passions and interests, you can enjoy your retirement years to the fullest. In addition to reviewing your budget, we can provide comfortable retirement planning tips that empower you to make informed decisions. By focusing on your unique financial situation and lifestyle aspirations, we can help you develop a roadmap that ensures peace of mind throughout your retirement. This holistic approach will not only address your financial needs but also enhance your overall quality of life during these rewarding years. In our commitment to your financial well-being, we can guide you through the retirement planning essentials, ensuring no critical aspect is overlooked. By combining both your financial resources and personal aspirations, we create a comprehensive plan that accommodates any potential challenges ahead. Ultimately, this thoughtful planning not only secures your financial future but also allows you to savor every moment of your retirement journey. As you navigate this important phase, it’s essential for advisors to implement effective retirement planning strategies for advisors, ensuring that clients receive tailored guidance that resonates with their individual goals. By prioritizing open communication and ongoing support, we can adapt your plan as life circumstances change, further solidifying your financial confidence. Together, we will cultivate a resilient strategy that not only meets your needs today but also evolves with you in the future.
Crucially, we’ll use cashflow planning to predict how inflation might rise over time, potentially increasing the cost of maintaining your chosen standard of living. This means you can continue drawing enough to reach your goals in retirement, without taking more than you need from your savings.
Consequently, you leave more of your wealth in your pension, where it is invested and could continue growing.
Without a clear budget and a detailed cashflow plan, you could spend beyond your means and deplete your savings pot earlier in your retirement. This could result in you making sacrifices to your “Why” for retirement.
It’s important to consider the tax you might pay when drawing from your savings
When drawing from your savings, it’s important to consider the tax you might pay. By finding ways to reduce your tax bill, you can retain more of your wealth, meaning you can consistently achieve your “Why”. There are several ways to achieve this.
Normally, you can take the first 25% of your pension as a tax-free lump sum, up to the Lump Sum Allowance (LSA) of £268,275 in 2025/26.
Any withdrawals from the remaining 75% of your pension, which exceed the Personal Allowance (£12,570 in 2025/26) are usually taxed at your marginal rate of Income Tax. So, it’s important to be aware of how much you take from pensions, and how you use your tax-free lump sum.
Many pension providers will allow you to draw from the tax-free and taxable portions of your pension at the same time, and this could help you reduce the Income Tax you pay.
For instance, if you needed to draw £20,000 from your savings to fund your lifestyle, you could take £10,000 from the tax-free lump sum and another £10,000 from the taxable portion. As long as you didn’t generate any more income that year, you would be within your Personal Allowance and wouldn’t pay Income Tax.
This is a simple example, but it demonstrates how we could help you use your lump sum efficiently and potentially reduce the tax you pay. We’ll also refer back to your budget to make sure you’re not drawing more than you need and paying tax unnecessarily.
As well as your pensions, you might have other tax-efficient savings, such as those in ISAs. Combining your ISA savings with carefully planned withdrawals from pensions could help you further reduce tax, meaning you can direct more wealth towards achieving your “Why”.
Bear in mind that this strategy only works while you have a portion of your lump sum left, so is more suited to early in retirement.
You may need to adjust withdrawals from your pension during a period of market volatility
Alongside tax, market volatility is another factor that could make it more difficult to keep drawing the necessary funds to achieve your “Why” throughout retirement.
This is because the wealth in your pensions is invested on your behalf. When you draw an income from your pension, some of those investments are sold to generate the funds you take out.
This means that during a period of market volatility, when the value of your investments falls, you may need to sell more units to generate the same level of income. When this happens, you could deplete your pension savings faster than expected.
In some cases, this could mean you run out of money and can no longer achieve your “Why” for the remainder of your retirement.
To prevent this, we can help you adjust your pension withdrawals and potentially use savings from other sources, such as your ISAs, until the markets recover.
Our advice helps you achieve your “Why” throughout retirement
Building wealth during your working life is a crucial part of your retirement plan. However, it’s equally important that you draw sustainably from your savings and adapt to changing circumstances once you transition to retirement.
We provide ongoing support so you can continue funding your dream lifestyle for the remainder of your retirement. Our team will work closely with you to assess your current financial situation and help you adjust your strategies accordingly. Based on your retirement readiness quiz results, we can identify areas where you may need to pivot or reallocate resources to ensure your long-term goals are met. Together, we will create a tailored plan that not only secures your financial future but also enhances your enjoyment of this well-deserved phase of life.
Learn how to achieve your “Why” with our free webinar
On Wednesday 21st May 2025 our expert financial advisers will be hosting a free webinar from 6pm.
Focusing on the question “Do you have enough for the retirement you want?” we’ll look at:
- The Modern Retirement Landscape – Why cliff-edge retirement is out, and flexible, phased transitions are in
- Real-life Cashflow Examples – Including stress tests like market crashes, inflation and changing income needs
- Typical Concerns & Smart Strategies – From changes to tax regulations to the best approaches for planning with confidence
- How We Help – Learn about our no-pressure advice journey, and how you can book a free personalised cashflow modelling session.
To book your free place, register here.
Get in touch
We are here to make your “Why” for retirement a reality.
Email hello@fcadvice.co.uk or call 0333 241 9900 for more information.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate tax planning.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term (minimum of 5 years) and should fit in with your overall risk profile and financial circumstances.